OECD workshop on measuring the link between public procurement, R&D and innovation. "Linking EU Procurement and CIS Data: Results from Germany", presentation by Christian Rammer

1. Linking EU Procurement and CIS Data: Results from Germany
Christian Rammer
Centre for European Economic Research (ZEW), Germany OECD Workshop on Measuring the Link between Public Procurement, R&D and Innovation, Paris, 5-6 December 2013

2. Research Question
Does EU procurement data (TED) provide a useful source for analysing the link between innovation and PP?
(1) Representative in terms of sector and size?
(2) Representative in terms of innovation activities?
Approach
- Linking TED data (German enterprises) to German CIS
- Comparing with results from PP question in CIS 2012

3. Strengths and Limitations of Data Sources
TED data - Administrative data on awarded contracts - Data on contract volume (often missing) and activity - Size threshold: only larger contracts - Incomplete coverage: almost no information on security- related contracts - No information on innovation
-Contracts often through consortia / lead contractors - German TED data are subject to substantial undercoverage

4. CIS 2012 PP Question

5. Strengths and Limitations of Data Sources
CIS 2012 data - Self-reported data (respondents may have incomplete information on awarded contracts) - Data only for sectors and size classes covered by CIS - No information on the number/size of contracts - Covering enterprises with small PP contracts and (potentially) sub-contractors
-Information on innovation activities related to PP contracts, but no information on the nature of innovation

6. Linking TED to CIS
•German TED data (provided by OECD)
•awarded PP contracts to firms located in Germany in the years 2006-2011
•139,445 awards
•incl. PP by non-German authorities
•Mannheim Enterprise Panel - MEP (Creditreform/ZEW)
•kind of business register (4.4 million firms that were active during 2006 to 2011, 3.2 million active firms by the end of 2012)
•sampling frame for German CIS
•German CIS data
•annual survey based on a panel sample (“Mannheim Innovation Panel” – MIP, incl. firms < 10 employees)
•66,711 different firms were part of 2006-2011 samples in at least one year
•27,018 different firms with at least one response during 2006-2011 (4,253 of them responded each year)

7. Matching TED to MEP and MIP
139,445 PP awards (2006-2011)
>3,500 no proper entities (consortia, non-enterprise organisations etc.)
46,822 different contractor names
<35,000 different entities
26,498 enterprises identified in the MEP (representing 108,902 PP awards = 78%)
3,849 enterprises part of the MIP sample in 2006-2011
2,077 enterprises responded in MIP during 2006-2011 (~1,000 per year; 6.8% of all responses in these years)
<31,500 enterprises
incomplete names, typing errors, local subsidiaries
enterprises outside sample frame, sampling quota (13%)
low response rate
1,528 enterprises responded in the German CIS in the year they received a PP award
infrequent panel participation

8. CIS
MIP
MIP until
2004
PP contractors by sector
A (agriculture, forestry, fishing)
1.1
B (mining, quarrying)
0.3
C (manufacturing)
16.9
D (electricity, gas, steam supply)
1.5
E (water supply; sewerage, waste management)
2.5
F (construction)
27.2
G (wholesale/retail trade, repair of vehicles)
14.1
H (transportation and storage)
4.7
I (accomodation/food services)
0.2
J (publishing, broadcasting, telecommunication, IT services)
3.8
K, L (financial, insurance, real estate)
1.4
M (professional, scientific, technical services)
14.5
N (administrative and support services)
7.7
O (public administration, defence, social security)
0.2
P (education)
0.5
Q (human health, social work)
0.9
R (arts, entertainment and recreation)
0.4
S (other services)
2.1
Total
100
Share in all enterprises with a PP award (%)
Nace rev. 2
TED/MEP 2006-2011
CIS 2010-2012
-
0.2
100
100
-
-
-
-
-
0.2
-
0.1
-
6.8
14.3
15.6
0.8
0.8
12.8
9.9
-
-
9.0
4.2
19.8
5.8
-
3.6
3.5
7.1
1.1
2.9
38.2
41.0
0.5
1.7
-
0.1
MIP sample CIS weighted

9. PP contractors by size
0 – 4
18.2
5 – 9
11.1
10 – 19
17.3
20 – 49
22.5
50 – 99
12.5
100 – 249
10.2
250 – 499
4.0
500 – 999
2.3
1,000 +
2.1
Total
100
Share in all enterprises with a PP award (%)
No. of employees
CIS 2010-2012
6.4
-
14.9
-
19.5
42.7
22.8
32.0
12.8
12.2
10.7
8.4
4.6
2.8
3.6
1.1
4.7
0.9
100
100
TED/MEP
2006-2011
MIP sample CIS weighted

10. PP Contracts: TED and CIS Results
•Receiving a PP contract is a rather rare event: - 16.7 percent of all firms in MIP 2012 sample - 18.5 percent (weighted) in CIS sectors/size classes (16.0% only national, 0.3% only abroad, 2.2% both)
•Enterprises with PP contracts during 2010-2012 (CIS): - - 13.6% with PP contracts contained in TED during 2010-2011 - 5.5% had contracts earlier (2006-2009) - 80.9% were not found in TED
•Enterprises with PP contracts 2010-2011 (TED) and response in CIS 2012: - 46.7% reported a PP contract in the CIS questionnaire - 43.9% reported no PP contract - 9.4% did not respond to PP question

11. Mean values
Product innovator
Process innovator
Marketing innovator
Organisational innovator
In-house R&D
CIS ('10-'12)
50.1
32.4
49.3
48.0
41.8
TED ('06-'11)
50.3
40.9
51.4
59.7
52.4
Characteristics of PP Contractors
* product/process innovative enterprises only; ** enterprises with in-house R&D only
30
39
3.9
5.1
TED ('06-'11)
38
41
7.5
8.3
CIS ('10-'12)
Public funding for innovation (%)*
Innovation cooperation (%)*
R&D expen- diture per sales (%)**
Innovation expenditure per sales (%)*
Mean values
34.1
27
34
538
1,297
TED ('06-'11)
31.4
25
33
247
462
CIS ('10-'12)
Age (years)
Share of graduated employees (%)
Export share (%)
Sales (m€)
Employees
(#)
Mean values

12. Correlation between PP award and innovation activity when controlling for size, age, sector and region (results of regression models):
TED
marginal effects, % points (t-values) 2006-2012
- product innovation 0.9 (0.62)
- process innovation -1.3 (-0.99)
- marketing innovation -0.2 (-0.11)
- organisational innovation -3.2 (-1.39)
- new-to-the-market products 0.6 (0.59)
- in-house R&D activity 0.5 (0.37)
- innovation expenditure per sales -1.1 (product/process innovative enterprises only) (-3.27)
- R&D expenditure per sales -0.9 (enterprises with in-house R&D only) (-2.53)
- share of sales with new products 1.7 (product innovators only) (1.61)
- share of sales with new-to-the-market 0.4 products (only firms with n-t-t-m innovation) (0.39)
CIS CIS 2012
2012 excl. TED
9.6 12.0 (5.92) (6.54)
1.1 2.9 (0.79) (1.73)
13.8 15.6 (8.53) (8.53)
11.8 12.8 (7.38) (7.04)
5.5 6.3 (5.10) (4.87)
7.8 8.0 (4.87) (4.35)
-0.3 -0.6 (-0.45) (-0.92)
-0.5 -0.6 (-0.61) (-0.68)
-0.3 -0.6 (-0.27) (-0.52)
-1.3 -1.9 (-0.92) (-1.20)
Link of PP Awards to Innovation

13. Conclusions
•Linking TED to CIS data gives an incomplete picture: focus on larger enterprises in less innovation-oriented sectors
•Linked TED/CIS data provide different conclusions on the link between PP and innovation compared to directly asking firms on PP contracts
•TED data do not cover semi-public entities, whereas CIS may underreport PP contracts (respondents do not have complete information)
•CIS data may include many very small PP contracts
•TED: innovations introduced by other enterprises than the contractor, and sub-contractor innovations not captured
•CIS: older innovations (i.e. introduced prior to the reference period) not captured

14. Steps to Improve Data Availability
 TED: extend TED coverage to smaller contracts, include information on sub-contractors
CIS: include question on PP contracts that goes beyond the pilot question :
- size/nature of PP contracts
- type of innovation activity related to PP contract
Dedicated PP survey based on a sound conceptual framework on what is PP and how it can be linked to different types of firm innovation

15. Thank you for your attention!
rammer@zew.de

16. Characteristics of PP Contractors
•Average size: 166 employees (median: 22) €46.7m sales (median: €3m)
•On average, each enterprise received 4.1 PP awards in 2006-2011 (median: 2)
•Average volume of PP awards: €1.85m (median: €0.43m) [award volume missing for 28% of awards!]
•Award volume is about 17% of annual sales of enterprises receiving a PP award (median: 9%)
•Total volume of PP awards 2006-2011 is 1.57% of 2006- 2011 sales of enterprises with at least one PP award in that period

17. Product innovatora)
Process innovatora)
Marketing innovatora)
Organisational innovatora)
In-house R&Da)
No PP award
42.2
35.3
46.9
50.3
41.5
PP award
50.4
40.9
51.4
59.7
52.4
Innovation Behaviour of PP Contractors
a) 3-year reference period; * product/process innovative enterprises only; ** enterprises with in-house R&D only
30
40
2.7
5.2
PP award
27
31
4.3
8.5
no PP award
Public funding for innovationa) (%)*
Innovation cooperationa) (%)*
R&D expen- diture per sales (%)**
Innovation expenditure per sales (%)*
Innovation activities in the year the contract was awarded
Employees
(#)
Sales (m€)
Export share (%)
Share of graduated employees (%)
Age (years)
no PP award
416
130
29
21
31.6
PP award
1,179
497
40
27
33.8

18. Effects of Past Innovation Behaviour on Receiving PP Award (preliminary results)
Effect of innovation activity in the year before a PP contract was awarded on the probability to receive a PP award (controlling for size, age, sector and region; results of regression models): marginal effects, % points (t-values) PP award in year t - product innovator in t-1 0.5 (3.26) - process innovator in t-1 -0.3 (-2.04) - only new-to-the-firm products in t-1 0.3 (1.74) - new-to-the-market products t-1 0.0 (0.17) - in-house R&D activity t-1 2.7 (1.31) - innovation expenditure per sales t-1 -1.1 (-1.15) - share of sales with only new-to-the-firm products t-1 1.0 (2.54)
- share of sales with new-to-the-market products t-1 0.1 (1.22)

19. Limitations of TED and CIS Data
TED
•Indirect innovations, i.e. the use of innovations introduced by other enterprises than the contractor most probably not captured (e.g. using new materials/new equipment)
•Subcontractors (and their innovations) not captured
•PP awards by semi-public entities not captured
•Focus on larger enterprises in non-innovative sectors
CIS
•No information on the type of innovation/degree of novelty
•Using older innovation (i.e. introduced prior to the reference period) most likely not captured
•Respondents may have no information about PP contracts in their enterprise
•No information on the size and significance of PP contracts